Moon takes Korean stocks for a ride in post-election trading
Hopes for expansionary policy go hand-in-hand with profit taking
KIM JAEWON, Nikkei staff writer
SEOUL -- South Korea's stock market saw volatile trading Wednesday, the morning after Keynesian Moon Jae-in won the presidential election. Hopes that expansionary fiscal policy would boost the economy pushed stocks high at the opening, but was followed by an equally acute drop as investors hurried to lock in profits.
The local currency fell slightly due to a strengthening U.S. dollar.
As of 13:00 local time, the country's benchmark stock index Kospi was trading at 2,276.79, down 0.69% from Monday's close. Local trading was closed on Tuesday due to the election. Earlier in the morning, the index surged as high as 2322.22, before quickly falling to 2275.88 at one point.
The index has continued to rise after hitting a record high of 2,241 earlier in May on the back of strong foreign buying and rising corporate earnings.
Analysts say that the stock market would likely to continue its surge thanks to solid corporate earnings along with aggressive buying from foreign investors.
"The market is upbeat on the back of better-than-expected [first quarter] earnings as well as the strong net buying of foreign investors," said Lee Jong-woo, head of research at IBK Securities. "The new president issue has already been reflected in the market because of the wide gap in his support [over other candidates]."
According to data from the KRX and FnGuide, Kospi-listed companies' combined operating profit reached 149.3 trillion won ($130 billion) in 2016, up from 127.2 trillion won a year ago. Aggregated net profit also increased to 101.8 trillion won from 91.2 trillion won during the same period.
Foreign investors led the upbeat trend thanks to 6.8 trillion won in net buying this year. The amount of foreign investor-owned stocks marked 528.6 trillion won as of May 4. They hold 36.3% of stocks in the Kospi in May, up from 35.1% in December.
The Korean won fell to 1,138.36 against the U.S. dollar at one point on Wednesday morning, from 1,131.40 won on Monday.
"The won started weak today as the dollar had been strong during the holiday. But the gap is narrowing as foreign investors are net buying in the stock market," said Jeon Seung-ji, an analyst at Samsung Futures.
Credit ratings agencies said that election of the new president removes uncertainties that had arisen from the abrupt political transition.
"The conclusion of the impeachment process in mid-March was credit positive for the sovereign because it allowed a new president to come in and focus on formulating policies that address Korea's structural economic challenges amid growing domestic and external headwinds to growth, which the election now takes to effect," said Steffen Dyck, a senior credit officer at Moody's, on Wednesday.
But some stocks were directly hit by Moon's election. The share price of Korea Electric Power was at 43,850 won Wednesday morning, down 4.26% on the president's policy to reduce coal and nuclear power plants.